Walgreens, one of the largest pharmacy chains in the United States, has announced plans to close 1,200 stores nationwide by 2027. This move, part of a “footprint optimization program,” aims to streamline the company’s operations and improve financial performance in a challenging retail environment. The closures will unfold over the next three years, with about 500 of them expected to occur in the fiscal year 2025.
The decision follows months of uncertainty, as Walgreens had previously disclosed plans for store closures without specifying the number. As of August 31, 2023, the company had over 8,000 locations across the U.S.
Walgreens has been grappling with various financial challenges in recent years. The company has faced tight reimbursement rates for prescription drugs, rising operational costs, and growing competition from online retail giants like Amazon, as well as major brick-and-mortar retailers such as Walmart and Target.
In its statement, Walgreens emphasized that the closures are part of a broader effort to stabilize its retail pharmacy operations. Tim Wentworth, the company’s CEO, said the company would focus on “optimizing [its] footprint, controlling operating costs, improving cash flow, and addressing reimbursement models to support dispensing margins.” Wentworth, who was appointed CEO in 2023, expressed confidence that these changes would yield long-term financial and consumer benefits.
“This turnaround will take time,” Wentworth acknowledged, “but we are confident it will yield significant financial and consumer benefits over the long term.”
Walgreens hopes that the immediate store closures in 2025 will help free up cash flow, allowing the company to reinvest in its operations and offset some of the financial pressures it has been facing. The chain’s net loss swelled to over $3 billion in the final quarter of 2024, largely driven by softer retail and pharmacy sales in the U.S., opioid litigation settlements, and an equity investment in China. Despite these challenges, Walgreens shares rose by nearly 4 percent following the announcement, reflecting cautious optimism from investors.
Walgreens’ struggles mirror broader trends in the pharmacy industry. Its competitors, CVS Health and Rite Aid, are also undergoing significant transformations. CVS is nearing the end of a three-year plan to close 900 stores, while Rite Aid has emerged from bankruptcy with a reduced store count of around 1,300 locations.
Walgreens has also faced setbacks in its ambitious plan to add primary care clinics next to some of its stores. The initiative, launched under former CEO Rosalind Brewer, aimed to expand the company’s healthcare offerings, but Walgreens has since scaled back this effort.
In addition to industry-specific challenges, the pharmacy sector has been hit hard by the rising costs of running physical stores. Many drugstore chains have been forced to compete with the convenience and lower prices offered by online retailers like Amazon, which has made significant inroads into the pharmaceutical space.
A significant portion of Walgreens’ financial troubles stems from its involvement in opioid litigation. Like other pharmacy chains, Walgreens has faced numerous lawsuits related to its role in the opioid epidemic, resulting in hefty settlements. These legal challenges have taken a toll on the company’s bottom line, contributing to the $3 billion net loss it reported for the final quarter of 2024.
The financial fallout from these settlements, combined with weaker-than-expected retail and pharmacy performance in the U.S., has hurt the company’s operating income. However, Walgreens has been proactive in addressing these issues, and the store closures are part of a larger strategy to regain financial stability.
As Walgreens implements its optimization strategy, it’s not the only company in the sector making difficult decisions. Earlier this month, CVS announced that it would cut approximately 2,900 jobs across the U.S. as part of its own cost-savings program. The layoffs will primarily affect corporate roles, rather than front-line employees working in stores, pharmacies, or distribution centers.
CVS, like Walgreens, has been adapting to the rapidly changing retail and healthcare landscapes. As pharmacy chains continue to face rising costs and increased competition, many are finding it necessary to make tough decisions to maintain profitability.
While the decision to close 1,200 stores is a significant step, Walgreens remains committed to stabilizing its operations and providing accessible healthcare services to its customers. The company’s leadership believes that by optimizing its store footprint and focusing on core operational improvements, Walgreens will emerge from this challenging period stronger and more resilient.
However, the closures are likely to raise concerns in communities where Walgreens stores serve as essential healthcare access points. For many, especially in rural or underserved areas, the closure of a local Walgreens may mean fewer options for filling prescriptions, receiving vaccines, or accessing basic health services.
As the company navigates these challenges, its success will depend on how well it can balance the need for cost-cutting measures with its commitment to serving its customers’ healthcare needs. Walgreens’ leadership is optimistic, but the coming years will be crucial in determining the long-term viability of its strategy.
